July 23, 2020
If we extend our Covered Period to December 31, our qualified payroll will be almost three times the total loan amount. Do we have to submit payroll all the way through December 31 or only as long as it takes to exceed the loan amount?
Posted by Armanino Financial Advisory Team
The first issue in your question is that you cannot extend your Covered Period to December 31 unless your loan funds on or after July 17, in which case your Covered Period automatically ends on December 31. You can extend to 24 weeks from the date your loan funded if it funded before June 5, at your option. Your Covered Period is automatically 24 weeks if it funded between June 5 and July 17. The second issue in your question is the notion that your payroll costs will be three times your loan amount. You cannot claim forgiveness for spending your own money. The government wants to know how you spent its money, not your own. Thus, your payroll costs can be no more than your loan amount. So long as you can show that you spent PPP money for payroll, you can stop when you’ve exhausted the total loan amount assuming you are completely confident that you captured all forgivable spend correctly. If you spent at least the total loan amount during the Covered Period, any reduction factors will be applied against the total loan amount, regardless of whether you spent more than that on payroll during the Covered Period. Example: Loan amount = $200,000, payroll in Covered Period of 24 weeks = $300,000, FTE Reduction Factor = 20%. Forgiveness would be $160,000 ($200,000 less 20%), not $200,000 ($300,000 less 20%, rounded down to total loan amount).